India will stay ahead of China on the growth curve in 2017 and 2018, said the International Monetary Fund (IMF) while retaining the country’s GDP forecast at 7.2 per cent for the current fiscal. “Growth in India is forecast to pick up further in 2017 and 2018,” the IMF said in its latest World Economic Outlook Update released in Kuala Lumpur on Monday. China’s growth, the IMF said, is expected to remain at 6.7 per cent in 2017, the same level as in 2016, and to decline only modestly in 2018 to 6.4 per cent. Global output is projected to grow by 3.5 per cent in 2017 and 3.6 per cent in 2018, said the report. “While activity slowed following the currency exchange initiative, growth for 2016 –– at 7.1 per cent –– was higher than anticipated due to strong government spending and data revisions that show stronger momentum in the first part of the year,” the IMF said in its latest update.

Global growth for 2016 is now estimated at 3.2 per cent, slightly stronger than that of April 2017. This primarily reflects much higher growth in Iran and stronger activity in India following national accounts revisions, the report said. “Economic activity in both advanced economies and emerging and developing economies is forecast to accelerate in 2017, to 2 per cent and 4.6 per cent respectively, with global growth projected to be 3.5 per cent, unchanged from the April forecast,” it said.

The growth forecast for 2018 is 1.9 per cent for advanced economies, 0.1 percentage point below the April 2017 WEO, and 4.8 per cent for emerging and developing economies, the same as in the spring. The 2018 global growth forecast is unchanged at 3.6 per cent. The revisions mirror primarily macroeconomic implications of changes in policy assumptions for the world’s two largest economies, the United States and China, the multilateral agency said.

According to the report, China’s forecast for 2017 was revised up by 0.1 percentage point, signalling the stronger than expected outturn in the first quarter of the year underpinned by previous policy easing and supply-side reforms. For 2018, the upward revision of 0.2 percentage point mainly reflects an expectation that the authorities will delay fiscal adjustment to meet their target of doubling 2010 real GDP by 2020.

The delay comes at the cost of further large increases in debt, but downside risks around this baseline have also increased, it said. According to the IMF, China’s failure to continue focus on addressing financial sector risks and curb excessive credit growth could result in an abrupt growth slowdown, with adverse spillovers to other countries through trade, commodity price, and confidence channels.

A faster-than-expected monetary policy normalisation in the United States could tighten global financial conditions and trigger reversals in capital flows to emerging economies, along with US dollar appreciation, it predicted. The US is projected to grow at a clip of 2.1 per cent in 2017 and 2018.